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Alternative investments*

Alternative investments may play a role in your portfolio. Navigating this complex landscape requires a deep understanding to uncover unique opportunities.

When to consider alternative investments?

For investors with a long investment horizon and a higher wealth level, alternative investments can reveal opportunities beyond a traditional equity and fixed-income portfolio.

Different alternative investments can offer unique benefits

  • Exposure to non-traditional techniques and strategies
  • Incremental portfolio diversification
  • Portfolio protection during times of market distress

Alternative strategies can increase:

  • The potential for better risk adjusted returns compared with public stock and bond markets alone

Alternative investments might not work for everyone.

Alternative investments have the potential for bigger rewards—but they also carry their own unique risks and are intended for qualified investors only. Because alternative investments often employ sophisticated and aggressive techniques, they introduce higher levels of investment risk and complexity, require long-term capital commitments, and involve less liquid assets.

Hedge funds

Hedge fundsDisclosure 1 invest in a range of global asset classes such as equities, fixed-income, credit, currencies, and commodities. They can act as a valuable source of diversificationDisclosure 3 in portfolios.

Investing & retirement

Demystifying hedge funds

Read more about demystifying hedge funds.

Private equity

Private equity (PE)Disclosure 2 is a unique investment class that may offer higher returns relative to the public markets in exchange for taking on higher levels and different types of risk in private markets.

Two of the most well-known private equity strategies are venture capital, which invests in startups and early-stage companies, and leveraged buyouts, where an investment manager takes a controlling stake in an established company, typically using a significant amount of debt, thereby increasing risk and potential returns.

Private debt

Private debt refers to borrowing and lending by private entities outside the traditional banking system.

Multiple categories

Private debt strategies are commonly organized by the type of borrower—such as real estate developers, large technology companies, or distressed energy companies—and the risk level of the loans based on their priority of repayment. 

Niche investments

Private debt transactions involve non-bank entities working directly with borrowers. Unlike standard bank loans, private debt offerings can be tailored to suit borrowers' needs. 

DiversificationDisclosure 3 of income

Private debt can diversify a portfolio's sources of income as many of these transactions are not widely available to investors.

Real assets

Real assets are tangible investments with an intrinsic value tied to their utility. Examples include real estate, natural resources, commodities, and infrastructure investments.

Real estate

Investments target the income and appreciation of different property types, including multifamily housing, industrial facilities, senior housing, and hotels, among many others.

Infrastructure

Investments include claims on the income of toll roads, regulated utilities, ports, airports, and other real assets traditionally held and controlled by the public sector.

Natural resources

Investments include timberland, mineral, and energy rights or reserves.

CommoditiesDisclosure 4

Include energy products, agricultural products, precious metals, and building materials.

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    Frequently asked questions

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    Alternative investments tend to carry a higher risk level, and some strategies may require a minimum level of income or assets and a minimum investment threshold. Because of this, alternative investments are not suitable for all investors.

    Hedge funds use a variety of investment techniques, including traditional stock picking and computer-driven methods based on large amounts of data, such as statistical arbitrage or systematic trend-following.

    While some hedge funds are looking to deliver outsized returns along with elevated risk, others are much more conservative, seeking to deliver more modest returns with lower investment risk.

    Conventional ways of investing generally don’t have access to the sophisticated investment techniques hedge fund managers employ, as well as many of the instruments they use such as swaps and other derivative contracts. These characteristics can make hedge funds an alternative source of portfolio diversification.

    • Private debt can provide a compelling and meaningful opportunity set for investors who are qualified to participate because there’s a larger investable universe of private companies seeking debt financing than public loan funds or individual bonds.
    • Private debt can have a structural advantage, meaning the loans that managers make usually have a contractual floating rate, various lender protections, and sometimes an equity component to capture the upside potential of the borrower, all of which give the asset class unique return characteristics.
    • Private debt can offer portfolio diversification, attractive current income, lower volatility, capital preservation, and downside protection versus other investment vehicles.
    • Investing in private debt typically requires that investors meet certain qualifications, such as a high net worth, and experience in investing. Additionally, private debt funds often require very high minimum investments.
    • Unlike bonds or loan funds on an exchange, private investments aren't priced daily. This can help reduce the extent of overall portfolio swings that investors experience.
    • Because most private debt investments are illiquid and cannot easily be sold for cash, they can tie up a great deal of money for a lengthy period of time.
    • Due to the lack of a reliable index or even observable market prices, it can be difficult for investors to make informed decisions about individual options. We recommend that investors work with an advisor when exploring this asset class.
    • We believe private equity can provide a compelling and meaningful opportunity set for investors who are qualified to participate, as there’s a larger universe of private investable companies available compared with public stocks. Private equity historically has delivered higher returns than public marketsDisclosure 5.
    • Private equity investors may receive a premium in excess of public market returns because the investment cannot easily be sold quickly for cash.
    • Including private equity in investment portfolios can provide diversification benefits resulting in an improved risk-reward profile. Because of the unique characteristics of private equity investing, skilled manager research and due diligence are essential to achieving desired outcomes.
    • When constructing investment portfolios, the private equity asset class also offers diversification benefits. Even though investing in private equity can be risky, adding an allocation to portfolios may help to reduce the overall price risk of those portfolios while maintaining or increasing the expected return.

    For more information around private equity visit Truist Wealth alternative investments.

    • Investing in private equity typically requires that investors meet certain qualifications, such as a high net worth, and experience in investing. Additionally, private equity funds often require very high minimum investments.
    • Unlike stocks on an exchange, private investments aren't priced daily. This can help reduce the extent of overall portfolio swings that investors experience.
    • Private equity investments are illiquid and cannot easily be sold for cash quickly. They can tie up a great deal of money for a lengthy period of time.
    • Due to the lack of a reliable index or even observable market prices, it can be difficult for investors to make informed decisions about individual options. We recommend that investors work with an advisor when exploring this asset class.
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    * Alternative investments are intended for qualified investors only. Alternative Investments such as derivatives, hedge funds, private equity funds, and funds of funds can result in higher return potential but also higher loss potential. Changes in economic conditions or other circumstances may adversely affect your investments. Before you invest in alternative investments, you should consider your overall financial situation, how much money you have to invest, your need for liquidity, and your tolerance for risk. Alternative Investments are speculative and involve a high degree of risk.

    Some or all alternative investment programs may not be in the best interest of certain investors. Investors must have a pre-existing relationship of 6 months or longer with the financial advisor before becoming pre-qualified to receive information on alternative investment products. No assurance can be given that any alternative investment's investment objectives will be achieved. Many alternative investment products are sold pursuant to exemptions from regulation and, for example, may not be subject to the same regulatory requirements as mutual funds. In addition to certain general risks, each product will be subject to its own specific risks, including strategy and market risk. Certain alternative investments require tax reports on Schedule K-1 to be prepared and filed. As a result, investors will likely be required to obtain extensions for filing federal, state, and local income tax returns each year.

    Disclosure 1Hedge funds often engage in leveraging and speculative investment practices that may increase the risk of investment loss, can be highly illiquid, and are not required to provide periodic pricing or valuation information to investors. Hedge funds may involve complex tax structures and delays in distributing tax information. Hedge funds are not subject to the same regulatory requirements as mutual funds and often charge higher fee.

    Disclosure 2The risk profile of private equity investment is higher than that of other asset classes and is not suitable for all investors. There are inherent risks in investing in private equity companies, which encompass financial institutions or vehicles whose principal business is to invest in and lend capital to privately held companies. These risks include a long-term investment horizon, rigid liquidity restraints, and high bankruptcy rates among portfolio companies. Generally, little public information exists for private and thinly traded companies and there is a risk that investors may not be able to make a fully informed investment decision.

    Disclosure 3Diversification does not ensure against loss and does not assure a profit.

    Disclosure 4 Investing in commodities is speculative and involves a high degree of risk and not suitable for all investors. You could lose all or a substantial portion of your investment.

    Disclosure 5 “Hedge fund industry performance deep dive—Full year 2022.” Aurum Funds Limited, January 27, 2023

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